In: Finance
Matt wants to invest 100,000 in preferred stock that will pay qualified dividend income of 7%.
Matt has the following personal and business debt:
- Personal credit card with annual interest rate of 12%: $10,000
- Business credit card with annual interest rate of 9.5%: $50,000
- Home mortgage with annual interest rate of 6%: $450,000
- Student loans with annual interest rate of 7.5%: %40,000
- Car loan with annual interest rate of 8%: 20,000
Matt's marginal tax rate is 32% with dividends being taxed at 15%. How should Matt allocate the $100,000 to obtain the highest after-tax return?